Iraq's Odious Debts

Debt deal controversy: Iraq

by Odious Debts Online

October 15, 2004
High-profile author-activist Naomi Klein this week alleged a consortium, involving a US investment firm linked to President George Bush’s Iraq debt envoy, James Baker, had offered to use its influence to help Kuwait collect $27 billion in reparations from Iraq. According to another report by the Washington Post, the consortium, called International Strategy Group LLC, proposed in January to help the government of Kuwait seek full repayment of debt owed by Iraq. The offer, reports the Post, emphasized the participation of US investment firm the Carlyle Group as manager of any funds recovered, a month after Carlyle’s senior counselor, James A. Baker III, was appointed by President Bush to persuade foreign governments and private lenders to forgive more than $200 billion in Iraqi debt. Klein reports “the consortium informed Kuwait’s foreign ministry that the country’s unpaid debts from Iraq ‘are in imminent jeopardy,'” and with world opinion turning in favour of debt forgiveness, the consortium warned not only was Kuwait unlikely to see any of its $30 billion from Iraq in sovereign debt, the $27 billion in war reparations Iraq owed to Kuwait from Saddam Hussein’s 1990 invasion “may well be a casualty of the US [debt relief] effort.” The Washington Post reports the consortium proposed using its influence to get the Kuwaiti government priority over other Iraqi creditors during negotiations on the final settlement of Iraq’s foreign debt. Meanwhile, Carlyle has issued conflicting claims on its position, most recently denying it was part of the consortium effort, after earlier saying it had withdrawn from the consortium following Mr. Baker’s appointment as debt envoy last December. In another claim, a Carlyle spokesman told the Guardian newspaper Carlyle had “restricted” its consortium role while Mr. Baker was in office, but was still looking to receive a $1 billion investment as part of the deal. (The Washington Post reports International Strategy offered to create an entity, initially funded by $2 billion in Kuwaiti government money, that would take control of any funds collected from Iraq. Carlyle, according to the proposal, would initially manage $1 billion of the funds to make private investments in the Middle East, including Iraq.) Mr. Baker has been accused of a conflict of interest since the publication of confidential documents revealing the proposal.

For more on this story:

James Baker’s double life
by Naomi Klein, The Nation, from the November 1, 2004 issue

Carlyle disavows plan to get Kuwait business
by Terence O’Hara, Washington Post, October 14, 2004

Controversy over Iraq debt deepens
by David Leigh, Guardian (U.K.), October 14, 2004

Jubilee Iraq Press Release: Condemnation of James Baker’s double dealing on Iraq
by Jubilee Iraq, October 13, 2004

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